A new report has found that G20 nations and international development banks spent almost twice as much on international fossil fuel projects as they did on renewable energy projects between 2019 and 2021.
The study, conducted by the organisations Oil Change International and US-based Friends of the Earth, provides a sobering look at the flow of money into highly polluting international projects.
Between 2019 and 2021, multilateral development banks (MDBs) and G20 countries, including France, Germany and Italy, provided at least $55 billion (£55.5 billion) per year in international public finance for oil, gas and coal. This astronomical figure is 35% lower than in the period from 2016 to 2019, yet it threatens significant climate commitments.
“This support is in direct contradiction with the commitment of G20 nations under the Paris Agreement to align financial flows with 1.5 degrees Celsius (°C). We cannot afford new fossil fuels.”
How does international public finance work?
International public finance is money that governments and international organisations invest in foreign ventures. For example, the World Bank raises funds from member states and through funds borrowed from international capital markets. This money is then used to finance various infrastructure projects around the world. According to the International Energy Agency, in order to limit global warming to less than 1.5 degrees Celsius compared to pre-industrial levels, all new fossil fuel projects must end by this year.
At last year's COP26 conference in Glasgow, 39 countries and institutions signed a joint commitment to end direct international public finance for fossil fuels by the end of this year. However, money is still being invested in oil and gas companies abroad. “Currently, G20 countries and multilateral development banks are mainly using their international public finance to support fossil fuel companies and extend the fossil fuel era,” the report warns.
Which European countries are financing the international fossil fuel sector?
The report analysed the international public finance performance of Germany, Italy, France and the United Kingdom, as these four European nations are G20 members. All of them signed the Glasgow Statement, in which they pledged to end direct international fossil fuel financing.
1. Germany
Germany provided $2.8 billion (£2.83 billion) in public finance per year to fossil fuel projects between 2019 and 2021. However, through its international public finance institutions, Germany also allocated $2.2 billion (£2.22 billion) to clean energy, which is the third-highest figure among all G20 countries.
2. Italy
Italy provided $2.8 billion (£2.83 billion) in public finance per year for fossil fuel projects between 2019 and 2021. During the same period, it allocated only $112 million (£113 million) to clean energy.
3. France
France spent €260 million on fossil fuel funding. However, the country has a complete coal exclusion policy. France also allocated $2.8 billion to clean energy through its international public finance institutions, which is the highest figure among G20 countries.
4. United Kingdom
The United Kingdom spent $258 million (£261 million) per year on international fossil fuel financing between 2019 and 2021.
The report also named and shamed institutions such as the European Investment Bank and the European Bank for Reconstruction and Development, which invested $670 million (£678 million) and $640 million (£646 million) respectively in international fossil fuel financing.
What should countries and international development banks do?
The report calls on G20 countries and international development banks to completely pivot their international support from fossil fuels to clean energy. If they were to do so, their current average annual funding for clean energy would triple to $85 billion (£86 billion).
A recently published report by the UN Environment Programme found that current climate pledges do not provide a “credible pathway” to keep warming below 1.5 degrees Celsius.
“We had our chance to make incremental changes, but that time is over,” said Inger Andersen, Executive Director of the UN Environment Programme. “Only a root-and-branch transformation of our economies and societies can save us from accelerating climate disaster.”